Yahoo!

Yahoo! is getting closer to picking a new chief executive to replace Jerry Yang and investors are abuzz about who might be on top. While two names are riding the rumor circuit, Yahoo! might need something that neither of the named candidates has: youth.

On Friday speculation began circulating about possible CEO picks after a report said the Internet company narrowed its search to Carol Bartz, the current chairwoman of Autodesk (nasdaq: ADSK ), Susan Decker, Yahoo! (nasdaq: YHOO )’s president, and one other candidate.

Yahoo! is expected to make a decision before its earnings report on Jan. 27.
Yahoo’s shares rose 0.5% to $13.13, at the close on Friday.

Global Equities Research analyst Trip Chowdhry said that the ideal candidate is neither Bratz nor Decker, but a 25 to 30 year-old Steve-Jobs-like-wunderkind who is brash and product savvy. The problem with Yahoo! he said is products, technology, and motivation, and the new leader will have to be able to deal with all three. “If Bartz becomes CEO, investors should run the other way,” said Chowdhry. “Autodesk is a prehistoric company when it comes to technology. We want someone who can cut through the generation gap and who can take the company to the next level.”

Chowdhry doesn’t see an outside candidate taking the reins of Yahoo! and said that any internal promotion would probably come from the engineering ranks. “If someone is super bright Yahoo! is not going to be their first choice, it’s not going to be their second choice and it’s not going to be their third choice,” said Chowdhry. “I haven’t seen any person externally who can change the fortunes of Yahoo!”

Chowdhry isn’t happy with Decker as a pick either. “She oversaw three failed CEO’s and under her leadership the stock has gone down more than 80.0%,” he said.

Hewehi Market Updates

The major indices are holding near their best levels of the session. Financials (+1.9%) led the recent buying interest, taking the leadership spot from the energy sector (+1.5%).

Market breadth leans bullish. Advancers outpace decliners by more than 2-to-1 on the NYSE and by 4-to-3 on the Nasdaq. New 52-week highs outpace new lows by 61-to-1 on the NYSE, and are even on the Nasdaq. Volume is on the light side.DJ30 +93.30 NASDAQ +14.61 SP500 +12.43 NASDAQ Dec/Adv/Vol 1180/1616/802 mln NYSE Dec/Adv/Vol 951/2097/530 mln

The stock market has maintained last week’s bullish bias. At midday, the stock market is posting a substantial gain, with all ten economic sectors in positive territory. Market moving news has been relatively slow this session, with only one economic report set for release later in the afternoon, and no earnings reports.

Shares of Washington Mutual (WM 23.99, +2.44) have soared 24% on reports that it is close to a deal that will supply the struggling company with $5 billion in capital. The Wall Street Journal reports the deal will be funded by private-equity firm TPG and other investors.

Meanwhile, UBS (UBS 35.29, +1.64) is posting a healthy gain after being upgraded to Buy from Neutral at Merrill Lynch.

As a result, the financials sector has climbed 1.7%, and is providing leadership.

Microsoft (MSFT 29.27, +0.11) sent Yahoo! (YHOO 27.81, -0.55) a letter, warning that if Yahoo does not accept its Jan. 31 $44.6 billion offer, Microsoft will take its offer hostile by going directly to shareholders, according to reports. Yahoo responded that it is open to a deal with Microsoft, but feels the current offer undervalues the company.

In other deal news, Novartis (NVS 50.82, -1.30) is paying $11 billion to acquire a 25% stake in Alcon (ACL 153.61, +5.17) from Nestle.

Crude oil has rallied 2.9% to $109.25 per barrel. There does not appear to be a specific catalyst for the gains. As a result, the energy sector (+1.7%) has been a standout.
DJ30 +86.87 NASDAQ +13.81 SP500 +11.96 NASDAQ Dec/Adv/Vol 1138/1641/710 mln NYSE Dec/Adv/Vol 914/2095/471 mln

The stock market is trying to recover back to its session highs. The recent gains have been broad-based, with all ten economic sectors making it back to positive territory. Treasuries are facing some selling interest, with the 10-year note shedding 24 ticks.DJ30 +68.55 NASDAQ +10.16 SP500 +9.25 NASDAQ Dec/Adv/Vol 1140/1608/601 mln NYSE Dec/Adv/Vol 927/2046/396 mln

The Nasdaq fell to the unchanged mark, but has since recovered a bit as it posts a modest gain. All sectors have slipped off their best levels. Materials is now up only 0.8%, after being up as much as 1.9%. It remains the only sector in positive territory year-to-date, with a 3.7% advance.DJ30 +47.17 NASDAQ +8.46 SP500 +7.75 NASDAQ Dec/Adv/Vol 1167/1555/505 mln NYSE Dec/Adv/Vol 921/2005/328 mln

The major indices continue to post a gain, but are off their best levels of the morning. Four of the ten economic sectors are in negative territory, although their losses are modest.

The stock market is now up 9.6% from its 52-week low that was reached on March 17, with financials rebounding 17.8%.DJ30 +34.36 NASDAQ +7.02 SP500 +6.55 NASDAQ Dec/Adv/Vol 1190/1409/364 mln NYSE Dec/Adv/Vol 954/1903/235 mln

After dipping a bit, the major indices are trading near their opening highs. Washington Mutual (WM 11.95, +1.78) is spiking 17.5% on the capital infusion report.

The energy sector (+1.7%) is showing strength as crude rallies 2.1% to $108.45 per barrel. There is not a specific catalyst for the gain in crude oil prices. The materials sector (+1.8%) is providing leadership, as the fertilizer & agricultural chemicals group extends its rally.

Defensive oriented utilities (-0.2%), consumer staples (flat) and healthcare (+0.2%) are underperforming on a relative basis.

This session's economic calendar is light, with only the February consumer credit report at 15:00 ET.DJ30 +56.18 NASDAQ +13.14 SP500 +8.26 NASDAQ Dec/Adv/Vol 937/1516/229 mln NYSE Dec/Adv/Vol 780/2002/159 mln

The major indices open on a high note. Financials (+0.9%) are outperforming after the Wall Street Journal reported Washington Mutual (WM) is close to getting a $5 billion capital infusion from a private equity group and other investors.

Also topping headlines, is news that Microsoft (MSFT) sent Yahoo! (YHOO) a letter that stated Yahoo has three weeks to accept Microsoft's offer. Yahoo responded it is not against a deal with Microsoft, but the current offer is not in the best interest for Yahoo's shareholders.

DJ30 +43.90 NASDAQ +9.97 SP500 +6.91

S&P futures vs fair value: +9.7. Nasdaq futures vs fair value: +6.2.

S&P futures vs fair value: +9.4. Nasdaq futures vs fair value: +6.0.

S&P futures vs fair value: +11.9. Nasdaq futures vs fair value: +10.8. Current indications suggest a positive start to trading. In commodity trading, crude oil is up 1.1% to $107.38 per barrel. Gold is up 0.7% to $915.40 per ounce.

S&P futures vs fair value: +11.3. Nasdaq futures vs fair value: +10.3. Futures suggest a higher open to the trading day. Washington Mutual (WM) is close to completing a deal to get a $5 billion capital infusion from private-equity firm TPG and other investors, according to the Wall Street Journal. Microsoft (MSFT) has threatened a hostile takeover of Yahoo!(YHOO), if Yahoo does not agree to a merger within the next three weeks, according to the Wall Street Journal. Yahoo responded that it is not opposed to a deal with Microsoft, but feels the current offer undervalues Yahoo. In other deal news, pharmaceutical company Novartis AG (NVS) is buying a 25% stake in eye-care product maker Alcon (ACL), and may purchase another 52%.

06:13 am : S&P futures vs fair value: +12.0. Nasdaq futures vs fair value: +12.0.

06:13 am : FTSE...5990.30...+43.20...+0.7%. DAX...6826.34...+62.34...+0.9%.

06:13 am : Nikkei...13450.23...+157.01...+1.2%. Hang Seng...24578.76...+314.13...+1.3%.

7 Stocks You Need to Know for Wednesday

Stocks surged on Tuesday, after strong gains in Europe and Asia, with financial stocks leading the advance. Before the market open, Goldman Sachs and Lehman Brothers reported stronger than expected earnings. Later in the day, the Federal Reserve slashed its benchmark rate by 75bp to 2.25% in an attempt to ease the credit crisis and help the slowing U.S. economy.

The Dow gained +420.41, while the Nasdaq Composite lost +91.25, and the S&P 500 +54.14.

Here are 7 stocks to watch...

Goldman Sachs (NYSE:GS - News) reported a 53% decline in net profit, after writedowns and lower fixed income revenues. However, first quarter earnings of $3.23 per share beat estimates by $0.65. GS' Short Term PowerRating is 3.

Lehman Brothers (NYSE:LEH - News) reported first quarter earnings of $0.81, a 57% drop, but still beat estimates by $0.09. After the sudden collapse of Bear Stearns, speculation that LEH could be next to fall has been rampant, but today's numbers eased concern and led to a huge rally. LEH's Short Term PowerRating is 4.

Bloomberg reported a Wachovia analysts' note to investors that stated Merrill Lynch (NYSE:MER - News) "is the riskiest" of the remaining U.S. investment banks. MER's 4.

Yahoo! (NasdaqGS:YHOO - News) laid out its vision for the future, stating that it expects revenue to double over the next three years. The company also reaffirmed its Q1 and FY08 outlook. YHOO's Short Term PowerRating is 6.

After the close, Adobe Systems (NasdaqGS:ADBE - News) reported earnings of $0.48, beating estimates by $0.03. ADBE's Short Term PowerRating is 5.

Visa (NYSE:V - News) is set to make its debut as a publicly traded company tomorrow. The $17 billion IPO will be the biggest stock sale in U.S. history, second only to the $22 billion offering of Industrial & Commercial Bank of China.

Morgan Stanley (NYSE:MS - News) is scheduled to report before the market open on Wednesday, with analysts looking for $1.03 per share. MS' Short Term PowerRating is 4.

Do you think Morgan Stanley will close up or down on Thursday? Go to TradingMarkets.com to play our Up or Down Daily Stock Contest for the chance to win $1000 every month by predicting the direction of a stock.

Tech stocks look for direction in early trading

Technology stocks put in a mixed early trading performance Wednesday. Gains came from Dell Inc. (DELL:19.98, +0.15, +0.8%) , Oracle Corp. (ORCL:19.63, +0.12, +0.6%) and Google Inc. (GOOG:444.29, +4.45, +1.0%) , while decliners included Apple Inc. (AAPL:126.20, -1.15, -0.9%) , Hewlett-Packard Co. (HPQ:47.54, -0.38, -0.8%) and IBM Corp. (IBM:116.41, -0.08, -0.1%) . Take-Two Interactive Software Inc. (TTWO: 25.00, +0.35, +1.4%) shares rose 31 cents to $24.99 after the video game publisher on Tuesday raised its quarterly outlook due to strong advance orders of "Grand Theft Auto IV." The tech-heavy Nasdaq Composite rose 7 points to 2,262.

Yahoo research centre in Israel

Web search company Yahoo Inc.said on Tuesday it has launched a new research lab in Israel, its first in the region.

The research lab in the northern port city of Haifa will be led by Ronny Lempel, an information organisation and retrieval expert. He previously worked at the Information Retrieval Group at IBM's Haifa Research Lab, focusing on research and development for enterprise search systems.

The lab, which opened on Tuesday, will focus on simplifying complex technology problems in searching the Web, Yahoo said.

Rival Google opened its second R&D centre in Israel in June. Its Israeli centres are in Tel Aviv, Israel's financial and cultural centre, and Haifa.

"Search is still in its infancy," Prabhakar Raghavan, head of Yahoo Research, said in a statement. "At Yahoo, we are working on the hard core science that can lead to search experiences that are significantly beyond the current art." (Reporting by Tova Cohen, editing by Elizabeth Fullerton)

EU approves Google's DoubleClick bid

European Union regulators say Internet portal giant's $3.1 billion bid for online ad tracker won't hurt competition.

European Union regulators have given a green light to Google Inc.'s $3.1 billion (€2.13 billion) bid for online ad tracker DoubleClick, saying the deal will not hurt competition for online ads.
Critics have complained the deal would give Google (GOOG) too much power.

But the European Commission says it found no proof that Google and DoubleClick would be able to squeeze out competitors. That is because Microsoft, (MSFT) Yahoo (YHOO) and AOL provided "credible" alternatives for placing ads on Web sites.

The commission says Google and DoubleClick are not currently rivals. It says Google's purchase even of a potential competitor would not hurt competition in the online ad market.

Not 'going to get into a fight' with Microsoft

News Corp. (NWS.A:17.79, -0.37, -2.0%) (NWS) Chairman Rupert Murdoch reiterated Monday that the company has no interest in getting into a bidding war with Microsoft (MSFT) over Yahoo (YHOO) . "Yahoo missed out," Murdoch said of the search engine and portal, having acquired Overture several years ago, only to underspend on it and watch Google (GOOG) overtake Yahoo with a more than 60% share of the search engine market share in the U.S. "We're very happy to be in the Google camp," Murdoch went on. "They sell out search advertising, and they pay us well for it." News Corp. is the parent company of Dow Jones, which includes MarketWatch.

Internet Stocks Could Suffer If The Buck Strengthens

The weakness of the U.S. dollar in 2007 provided a nice boost to the top-line growth rates for Google (GOOG), Amazon.com (AMZN), eBay (EBAY) and, to a lesser degree, Yahoo (YHOO). So what happens if the buck starts to strengthen?

In an interesting piece this morning, Lehman’s Douglas Anmuth takes a look at what would happen to the financial results of the major Internet companies if the dollar turned around and strengthened against the other major currencies. A 10% appreciation in the greenback, Anmuth calculates, would chop revenue growth by 7% at Google, 6% at eBay and Amazon, and 3% at Yahoo.

In 2007, Anmuth notes, the dollar fell 9% against the Euro and the British pound, while holding steady against the yen. He notes that eBay, which recently has generated about 51% of revenue overseas, reported 29% growth in 2007, but would have grown just 24% on a currency-neutral basis. Amazon, likewise, grew 39%, but would have grown 34.9% in a constant currency world. Google’s growth rate would have dropped to 51%, from 56%; Yahoo would have grown 7%, not 8%.

Anmuth also notes that the Internet companies are building up substantial cash balances overseas that can’t easily be deployed for buying back stock, paying dividends or other capital allocation moves. At the end of 2007, he notes, Amazon had $1.2 billion - 37% of its cash - in foreign denominated marketable securities. And he says eBay at the end of Q3 had $3.7 billion of its $4.4 billion in cash invested overseas.

Anmuth’s conclusion: “While currency movements can clearly be unpredictable, given weakness in the U.S. dollar in 2007 there may be greater risk to the downside on a reported basis for Internet companies - specifically Google, eBay and Amazon - should the U.S. dollar stabilize or recover beyond what is embedded in current estimates.”

Yahoo Board to Spurn $44B Microsoft Bid

Yahoo Inc.'s board will reject Microsoft Corp.'s $44.6 billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, a person familiar with the situation said Saturday.

The decision could provoke a showdown between two of the world's most prominent technology companies with Internet search leader Google Inc. looming in the background. Leery of Microsoft expanding its turf on the Internet, Google already has offered to help Yahoo avert a takeover and urged antitrust regulators to take a hard look at the proposed deal.

If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer -- originally valued at $31 per share -- directly to the shareholders. Pursuing that risky route probably will require Microsoft to attempt to oust Yahoo's current 10-member board.

Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock.

Yahoo's board reached the decision after exploring a wide variety of alternatives during the past week, according to the person who spoke to The Associated Press. The person didn't want to be identified because the reasons for Yahoo's rebuff won't be officially spelled out until Monday morning.

Microsoft and Yahoo declined to comment Saturday on the decision, first reported by The Wall Street Journal on its Web site.

Yahoo's board concluded Microsoft's offer is inadequate even though the company couldn't find any other potential bidders willing to offer a higher price.

Without other suitors on the horizon, Yahoo has had little choice but to turn a cold shoulder toward Microsoft if the board hopes to fulfill its responsibility to fetch the highest price possible for the company, said technology investment banker Ken Marlin.

"You would expect Yahoo's board to reject Microsoft at first," Marlin said. "If they didn't, they would be accused of malfeasance."

But by spurning Microsoft, Yahoo risks further alienating shareholders already upset about management missteps that have led to five consecutive quarters of declining profits.

The downturn caused Yahoo's stock price to plummet by more than 40 percent, erasing about $20 billion in shareholder wealth, in the three months leading up to Microsoft's bid.

Seizing on an opportunity to expand its clout on the Internet, Microsoft dangled a takeover offer that was 62 percent above Yahoo's stock price of just $19.18 when the bid was announced Feb. 1. Yahoo shares ended the past week at $29.20.

Led by company co-founder and board member Jerry Yang, Yahoo now will be under intense pressure to lay out a strategy that will prevent its stock price from collapsing again. What's more, Yang and the rest of the management team must convince Wall Street that they can boost Yahoo's market value beyond Microsoft's offer.

Yahoo's shares traded at $31 as recently as November, but have eroded steadily amid concerns about the slowing economy and frustration with the slow pace of a turnaround that Yang promised last June when he replaced former movie studio mogul Terry Semel as Yahoo's chief executive officer.

This isn't the first time that Yahoo has spurned Microsoft. The Redmond, Wash.-based company offered $40 per share to buy Yahoo a year ago only to be shooed away by Semel, according to a person familiar with the matter. The person didn't want to be identified because that bid was never made public.

Yahoo now may want that Microsoft to raise its price to at least $40 per share again. That would force Microsoft to raise its current offer by about $12 billion -- a high price that might alarm its own shareholders.

Microsoft's stock price already has slid 12 percent since the company announced its Yahoo bid, reflecting concerns about the deal bogging down amid potential management distractions, sagging employee morale and other headaches that frequently arise when two big companies are combined.

Although it isn't involved directly in the deal, Google is the main reason Yahoo is being pursued by Microsoft.

Yahoo has struggled largely because it hasn't been able to target online ads as effectively as Google.

Microsoft believes Yahoo's brand, engineers, audience and services will provide the company with valuable weapons in its so far unsuccessful attempt to narrow Google's huge lead in the lucrative Internet search and advertising markets.

As it examined ways to thwart Microsoft, Yahoo considered an advertising partnership with Google -- an alliance long favored by analysts who believe it would boost the profits of both companies. It was unclear Saturday if Yahoo's plans for boosting its stock price include a Google partnership, which would probably face antitrust issues.

A Microsoft takeover of Yahoo would also be scrutinized by antitrust regulators in the United States and Europe. The antitrust uncertainties could be cited as one of the reasons that Yahoo's board decided to spurn Microsoft.

Microsoft-Yahoo Deal Likely To Go Through

Yahoo Inc.'s (YHOO) stock was coasting just below Microsoft Corp.'s (MSFT) $31-a-share offer price Tuesday morning as more analysts said they believe the marriage will likely be consummated - even as they cautioned investors to be ready for surprises.

Yahoo has yet to respond to Microsoft's $44.6 billion bear-hug bid to acquire the Internet giant, a move which has prompted rival Google Inc. (GOOG) to publicly voice its opposition to the proposed merger.

On Tuesday, Yahoo was downgraded from buy to neutral by Banc of America Securities. It was the third such downgrade since Microsoft announced its offer on Friday, following similar moves by Susquehanna Financial Group and Soleil Securities Group.

The downgrades came after Yahoo's stock zoomed up more than 50% following the bid - which put the stock in range of several analysts' price targets.

In their reports, many analysts predict that the deal will likely happen and that, for now, investors would be wise to stick close to Microsoft's offer price, which they describe as generous.

"Given the significant premium above the Jan. 31, 2008, stock price, we believe shareholders would be apt to take advantage of this offer," analyst Brian Pitz of Banc of America Securities wrote in a note to clients.

Crawford Del Prete of International Data Corp. said he thinks the deal will eventually happen.

"But I think, given that it's hostile, it will take some time for Yahoo to sort through its options," he said in an email. "However, in the end I expect that they will conclude that this is the best option for shareholders, given the price that was offered and the absence of other suitors."
Still, there could be surprises.

Pitz pointed to reported negotiations between Yahoo and Google on a possible deal to outsource Yahoo's search ads to its rival as a way of blocking the Microsoft bid.

Microsoft's bid could also go higher and, contrary to the view of some observers, another potential buyer could emerge, he said.

"While it's difficult to raise debt in the current market environment, we believe a rival bid from a private-equity consortium is also possible," Pitz said.

Analyst Mark Mahaney of Citigroup, who raised his target price for Yahoo to $31 a share from $22, cited the two scenarios in a research note, but didn't give them as much as weight as other potential outcomes.

He said the $45 billion price tag and "the strategic value of Yahoo to Microsoft make the likelihood of a successful competing bidder very low."

An outsourcing deal with Google would be more likely and could be a viable strategy that could appease Yahoo's shareholders, he said.

But Mahaney gave more credence to another possibility: That Yahoo will reject Microsoft's offer, prompting the Redmond, Wash.-giant to bid higher, with the two giants eventually coming to an agreement.

"The deal makes significant strategic sense for Microsoft," he said. "Our review of bid histories in the software space makes us think this is the most likely outcome."

Mahaney cited another software giant, Oracle Corp. (ORCL), which has been on a buying spree over the past several years. In two prominent unsolicited bids - for PeopleSoft Corp. and, more recently, BEA Systems Inc. (BEAS) - the company ended up raising its offer price.

Many analysts still believe the proposed merger between Microsoft and Yahoo would meet stiff regulatory challenges in the U.S. and Europe.

But given Google's dominant position in online advertising, some of them believe Microsoft would clear this hurdle.

"We estimate that Microsoft and Yahoo today account for, at most, 30% of total U.S. online advertising, with their combined market share less in Europe," Mahaney said. "Thus, while we would expect substantial regulatory review, we assign this outcome only a 10% probability